The world’s relentless march towards greater sustainability continues unabated as the US, China and the European Union (EU) commit to new measures strengthening their respective climate commitments. 

Having been the international sustainability “bad boy” under the Trump Administration, the US under President Joe Biden has been key to make amends. On Earth Day, April 22, the White House promised to cut US emissions by 50-52% from 2005 levels by 2030.

The new targets expand upon former President Barack Obama’s earlier pledge to cut emissions by 26-28% by 2025. The US has also committed to double climate financing to the developing world to help them cut their emissions too. Sustainability has found its way to the highest levels of government as a national climate task force is developing a national climate strategy. 

This renewed zeal is partly driven by Washington’s desire to compete with China on green technology. Beijing promised at this year’s Earth Day Climate Summit to phase out coal starting in 2026-2030 as it seeks to reach peak emissions by 2030 and carbon neutrality by 2060. 

“It’s difficult to imagine the United States winning the long-term strategic competition with China if we cannot lead the renewable energy revolution,” says Blinken on April 19. The US, he warns, is falling behind China in solar panel, wind turbines, batteries and electric vehicle production.  

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Besides phasing out coal, China has also excluded coal and fossil fuels - even under “clean use” - from green activities to be funded by green bond issuance. People’s Bank of China (PBoC) governor Yi Gang says that Beijing is looking to mobilise “massive green investment” and identified green finance as a priority of this year.  

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Yi also said that PBoC will also be looking to develop a mandatory disclosure system to harmonise sustainability disclosure standards. It will also be working with the EU to harmonise green taxonomies over the two markets this year. 

Sustainability leader Europe is not resting on its laurels either. EU government leaders have reached an in-principle agreement on the European Climate Law, which aims to cut net greenhouse gas emissions of 55% or more by 2030 from 1990 levels and reach net zero by 2050. It has adopted the first part of its classification system for green economic activities. 

“We view these developments as a serious shift in Europe-wide policy that will progressively reshape economic activity across Europe and the allocation of capital globally,” says Bank of Singapore investment strategist Conrad Tan. He sees such moves eventually pressuring firms worldwide to better disclose climate risk management and sustainability-related performance. 

Green wealth 

Businesses are increasingly positioning themselves from a transition into clean energy. Spending on energy transition initiatives reached a new high of US$501 billion ($667.2 billion)  in spite of disruption from Covid-19. Tan sees this growing further in the years ahead. 

A Bloomberg NEF analysis already shows that solar and wind are the cheapest source of new bulk electricity generation in countries representing over two-thirds of the global population, three-quarters of GDP and 90% of electricity demand. The US Energy Information Administration has projected that the share of renewables in the US electricity generation mix would double to 42% by 2050 from 21% in 2020. 

But more needs to be done - the world still faces a temperature rise of around 2.4°C by 2100 based on the current trajectory based on projections by the Climate Action Tracker in May. The world could lose 10% of its GDP to climate change by the middle of this century, says a study by Swiss Re, potentially motivating key policymakers and industry leaders to act. 

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“Overall, we expect to see the current powerful climate-related political momentum continue in the coming months, with more policy announcements and commitments by the US, China, and other major economies ahead of the UN Climate Change Conference (“COP26”) meeting in November,” says Tan. 

This green turn has created new opportunities in renewable energy and decarbonisation technologies. Companies with indirect exposure to the ongoing decarbonisation of manufacturing, transport, construction and urban design also stand to benefit. 

“Companies slow to anticipate and adjust to these changes risk being gradually sidelined by investors or, in the extreme, having their operating models upended; those that adapt successfully will benefit from the reshaped economic landscape and enjoy more sustainable business prospects, with a better chance to prosper,” comments Tan.